AI Drafter 
TaxTMI 
TaxTMI 
2015 (10) TMI 2712
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....n on non-factory building 2,65,555 deserves to be quashed, as the regular assessment proceedings, as initiated by the ACIt-4, Kanpur by issue of notice under section 143(2) dated 09.10.2007 was not valid for the reason as the mandatory requirement of recording the requisite satisfaction, had not been complied with. 2. BECAUSE the variation between the "returned income" and the "assessed income", in so far as the same relates to addition/disallowance of (Rs.) a) Interest received on fixed deposit receipts (claimed as set off against share issue expenses and cost of capital work-in-progress) 57,82,396 b) Income from investment in mutual fund (claimed as set off against the cost under the head capital works-in progress) 20,10,594 c) Depreciation on non-factory building 2,65,555 is wholly illegal and unauthorized too as the Addl. CIT, Range -IV, Kanpur could not have acted as Assessing Officer in the case of the "appellant" and make assessment under section 143(3) of the Act. 3. BECAUSE looking to the facts that, in relation to the "return"e-filed on 28.11.2006; (a) the Asstt. Commissioner of Income Tax-4, Kanpu....
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.... BECAUSE, wholly without prejudice to the contentions raised in grounds No.5, 6.1 and 6.2 above, interest amounting to Rs. 19,69,673 as had been paid on "Term loan" and capitalized by the "appellant" under the head cost of 'Capital works-in-progress' was liable to be allowed as deduction. 8. BECAUSE similarly income earned from investment in "Mutual fund" out of proceeds of Term loan', during the period in which such 'Loan receipts' remained unutilized, had the effect of reducing the cost of 'Capital works-in-progress' and the authorities below have erred in law and on facts in treating the same as income under the head Income from other Sources and taxing the same as such. 9. BECAUSE in any case and wholly without prejudice to the contentions raised in ground no.8 above, such receipts, after being subjected to adjustment from short term capital loss as brought forward from earlier year, should have been treated as "short term capital gain", liable for taxation at a reduced rate of 10%. 10.1 BECAUSE the authorities below have erred in law and on facts in disallowing/upholding the disallowance of "appellant's" claim for depr....
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....ncurred by a 'going concern' and during the course of carrying on of its business. 6. BECAUSE the order appealed against is contrary to the facts law and principles of natural justice." 4. We first decide the appeal for A.Y. 2006 - 07. It was submitted by the learned AR of the assessee that as per page 3 of additional evidence, on 25.02.2002, UPSIDC asked the assessee company to deposit advance of Rs. 35,000/- so that Land Acquisition proceedings may be started and the same was deposited on 25.03.2002 by Draft Dated 21.03.2002 along with letter dated 21.03.2002 available on page 4 of additional evidence. He also submitted that as per the same, it has to be accepted that the Project work started in March 2002 and therefore, interest income should be capitalized as per the judgment of Hon'ble Apex Court rendered in the case of CIT vs. Bokaro Steel Ltd., as reported in 236 ITR 315 (SC) . He also submitted that the Judgment of Hon'ble Allahabad High Court rendered in the case of CIT vs. Indo Gulf Fertilizer & Chemical Corporation Ltd., 280 ITR 621 is not applicable in the facts of the present case. Regarding the tribunal order rendered in the case of ACIT vs. M/s Z ....
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....held in that case by Hon'ble Jurisdictional High Court that the company has chosen not to keep its surplus capital idle but has decided to invest it fruitfully and the fruits of such investment will clearly be of revenue nature. The ratio of this judgment as noted on Pager 626 of 280 ITR is that if the capital of a company is fruitfully utilized instead of keeping it idle, the income thus generated will be of revenue nature and not accretion to capital. It was held that interest income so earned is taxable as income from other sources. In the present case also, the facts are identical except this that instead of borrowed funds in that case, the funds in the present case are own funds but this difference is not relevant for the issue in dispute. In fact, this is clearly stated by Hon'ble Jurisdictional High Court itself in the same Para of this judgment that whether the company raised the capital by issue of shares or debentures or by borrowing will not make any difference to this principle that if the capital of a company is fruitfully utilized instead of keeping it idle, the income thus generated will be of revenue nature and not an accretion to capital. As per the learned AR of t....
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....rned AR of the assessee. We find that these judgments are of various non jurisdictional High Courts. Hence, these judgments are required to be considered separately if the same are on an aspect which was not decided by Hon'ble jurisdictional High Court because on the same aspect, if it is found that as per the judgment of Hon'ble Jurisdictional High Court, the issue in dispute is covered against the assessee, any judgment of a different High Court even if in favour of the assessee is not relevant because we are duty bound to follow the judgment of Hon'ble Jurisdictional High Court. When we consider these judgments, we find that in the case of Indian Oil Panipat Power Consortium Ltd. vs. ITO (Supra), the judgment of Hon'ble Delhi high Court is on this aspect also that as per section 3 of the Income Tax Act, for a newly set up business the previous year shall be the period beginning with the date of setting up of the business and as per charging section i.e. section 4 of the Income Tax Act, income which arises to the assessee from the date of setting up of the business but prior to commencement is chargeable to tax depending on whether it is of revenue nature or capital receipt. Henc....
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....n those cases where interest is earned out of borrowed funds and not in those cases where interest is earned by investing own funds but we find that in the case of Indo Gulf Fertilizer & Chemical Corporation Ltd. (Supra), this is a categorical finding of Hon'ble Jurisdictional High Court that whether the company raised the capital by issue of shares or debentures or by borrowing will not make any difference to this principle that if the capital of a company is fruitfully utilized instead of keeping it idle, the income thus generated will be of revenue nature and not an accretion to capital. This finding is on page 626 of 280 ITR. Hence, we are bound to follow the judgment of Hon'ble Jurisdictional High Court in preference to this judgment of Hon'ble Madras High Court and therefore, we hold that this judgment of Hon'ble Madras High Court is of no help to the assessee. 8. As per above discussion, we find that none of the judgments cited by the learned AR of the assessee is rendering any help to the assessee. Hence, respectfully following the judgment of Hon'ble Jurisdictional High Court rendered in the case of CIT vs. Indo Gulf Fertilizer & Chemical Corporation Ltd. (Supra), we ho....